____ use of their underlying network facilities for the delivery of new services. To grant these
____ carriers unconditional forbearance would provide them with the opportunity to leverage
____ their existing networks to the detriment of other potential service providers. In particular,
____ unconditional forbearance of the broadband access services provided by cable broadcast
____ carriers would create both the incentive and opportunity for these carriers to lessen com-
____ petition and choice in the provision of broadband service that could be made available
____ to the end customer. Safeguards such as rate regulation for broadband access services
____ will be necessary to prevent instances of below cost and/or excessive pricing, at least in
____ the near term.

Telephone companies also have sources of market power that warrant maintain-
ing safeguards against anti-competitive behaviour. For example, telephone companies
are still overwhelmingly dominant in the local telephony market, and until this domi-
nance is diminished, it would not be appropriate to forbear unconditionally from rate
regulation of broadband access services. (AT&T, p. 15)

In the opinion of AT&T Canada LDS, both the cable companies and the tele-
phone companies have the incentive and opportunity to engage in these types of anti-
competitive activities as a result of their vertically integrated structures. For example,
cable companies, as the dominant provider of broadband distribution services, would be
in a position to engage in above cost pricing in uncontested markets, unless effective
constraints are put in place. On the other hand, the telephone company will likely be the
new entrant in broadband access services in most areas, and therefore expected to price
at or below the level of cable companies. While this provides some assurances that tele-
phone companies are unlikely to engage in excessive pricing, it does not address the in-
centive and opportunity to price below cost. Accordingly, floor-pricing tests would be
appropriate for services of both cable and telephone companies. (AT&T, 16-17)

Furthermore, in the case of both cable and telephone broadcast carriers, safeguards
would also need to be established to prevent other forms of discriminatory behaviour and
to ensure that broadband access services are unbundled. (AT&T, 17)

[10-38] See, e.g., Lisa Bowman, "Will Merger Shut Lid on Open Access?," _ZDNet_
_News,_ January 11, 2000, available at http://www.zdnet.com/zdnn/stories/news/
0,4586,2420130,00.html.

[10-39] My point is not that this is the only threat. For example, as Denise Caruso has ar-
gued, the merger of Internet backbone providers might lead to a situation where peering
on the Internet (exchanging data between peers neutrally) will cease. In "Mergers
Threaten Internet's Informal System of Data Exchange," _New_York_Times,_ February 14,
2000, available at http://www.nytimes.com/library/tech/00/02/biztech/articles/14digi.
html, she writes, "In the early days of the Internet, self-interest forced backbone
providers into peering [the free sharing of data between service providers]... But it is
scarcely true today... [U]pon completion of the Worldcom-Sprint merger, a single
company would control nearly half of the Internet's backbone -- making it, literally and
figuratively, without peer. Given the furious pace and high stakes of the telecommuni-
cations industry today, some fear that it is only a matter of time before one big backbone
provider or another refuses to exchange data traffic with one of its peers. What happens
then? 'Well, they would have a legitimate excuse,' says Hal Varian, dean of the school of
information management at the University of California at Berkeley. 'An ISP could com-
plain, and rightly so, that another ISP was sending them huge amounts of traffic and
putting a load on their system... That's an excuse to say, 'We can't handle this guy's
packets; we aren't going to connect with him.'" Ibid.

[[309]]

p308 _ -chap- _ toc-1 _ p309w _ toc-2 _ +chap+ _ p310

v?